Lung repair and regeneration is carried out by different stem/progenitor cell populations distributed along the pulmonary axis, including the bronchiolar club (Clara) cells, the alveolar type II epithelial cells, and bronchioalveolar stem cels (BASCs). These epithelial cell types also function on a daily basis to facilitate gas exchange and maintain tissue homeostasis. After injury, signals instruct the stem cell to produce progeny of the affected lineage, but the molecular characterization of these signals remains limited. We have developed a 3D co-culture assay to interrogate the regulation of BASC differentiation at the single cell level. Lung endothelial cells co-cultured with BASCs support bronchiolar and alveolar cell differentiation. Recently, we have shown that modulating the co-culture environment alters BASC differentiation outcomes. We found that BMP4 treatment activates the calcineurin-dependent transcription factor NFATc1 in endothelial cells to induce expression of Thrombospondin-1 (Tsp1), which was necessary and sufficient for alveolar lineage-specific differentiation. TSP1 was required for alveolar lung injury repair in vivo. Thus, we have uncovered a new signaling axis that operates between BASCs and endothelial cells to control differentiation and injury repair. We now seek to further characterize the BMP-NFATc1-TSP1 pathway up and down stream of TSP1, and to identify additional signals from lung endothelial cells that regulate BASC differentiation. In Aim 1, we will define the molecules in BASCs that regulate differentiation. We will examine expression of candidate TSP1 receptors in 3D co-cultures and alveolar lung injury samples. TSP1-dependent mediators of differentiation will be identified in an unbiased fashion by RNA-seq from in vivo Tsp1-manipulation and functionally tested in 3D co-cultures. In Aim 2, we will further delineate the secreted factors produced by lung endothelial cells that influence alveolar differentiation. Initially we will test the candidat BMP4-NFATc1 target R-spondin2, a Wnt pathway ligand that we recently found was induced in response to BMP4 treatment, in BASC/endothelial cell co-cultures. A lineage tracing approach will be used to test the R-spondin2 pathway in BASCs in vivo. We will also perform RNA-Seq coupled with NFATc1-ChIP-Seq to identify additional BMP4 targets in lung endothelial cells. Our experiments aim to define how a multipotent lung stem cell is instructed to produce lineage-specific progeny. This work will provide an opportunity for the discovery of mechanisms operating in the stem cell niche and therapeutic targets for enhanced lung injury repair in lung disease.